Home buyers appear undeterred by rising mortgage rates and low inventory, snatching up whatever properties they can find. Pending home sales—a forward-looking indicator of home sales based on contract signings—eked out a 0.9% gain in July, marking the second consecutive month of increases, the National Association of REALTORS® reported Wednesday.
“The small gain in contract signings shows the potential for further increases in light of the fact that many people have lost out on multiple” opportunities to buy because of intensifying bidding wars, says NAR Chief Economist Lawrence Yun. “Jobs are being added and, thereby, enlarging the pool of prospective home buyers. However, rising mortgage rates and limited inventory have temporarily hindered the possibility of buying for many.”
High home prices and mortgage rates—which recently passed 7%—are pushing some buyers to the sidelines. Pending home sales are down 14% compared to a year ago, NAR’s data shows. That said, some of that annual decrease is being blamed on the lack of inventory for existing homes, which was down 15% in July from a year earlier.
Faced with a shortage of available existing homes, buyers who aren’t priced out of the market are increasingly looking to new-home construction for more choices. Sales of newly built single-family homes in July jumped nearly 32% higher than a year ago, the Commerce Department recently reported.
“New-home sales were solid in July because of an ongoing housing deficit in the U.S. and a lack of resales stemming from many homeowners electing to stay put to preserve their low mortgage rates,” says Alicia Huey, chairman of the board of the National Association of Home Builders.
The median sales price of a newly built home fell 9% annually in July to $436,700—nearing the median price of an existing home, which was $406,700.
The South and West have experienced the most gains in contract signings. In July, pending home sales rose in the two regions while decreasing in the Northeast and Midwest, according to NAR.
“The West region experienced a meaningful price decline in the past year, and buyers are quickly returning as a result,” Yun says. NAR recently reported that existing-home sales in the West rose 2.7% in July compared to June, while the median home price has been holding steady at a median of $610,500.
Still, while the housing market presents low inventory and higher mortgage rates compared to a year ago, all four major regions of the U.S. posted a decline in pending home sales in July compared to a year ago.